CJEU Advocate General Szpunar reasons against intra-EU claims under the ECT
In a recently published Opinion, Advocate General (“AG”) Maciej Szpunar at the Court of Justice of the European Union (“CJEU”) has said that the Achmea judgment should also apply to intra-EU claims under the multilateral Energy Charter Treaty (“ECT”), meaning that such claims cannot be arbitrated under the ISDS mechanism provided for by the treaty. The non-binding guidance was rendered in Komstroy v Moldova (Case C-741/19), which – paradoxically – does not concern an intra-EU dispute.
Intra-EU arbitration and the ECT: the status quo
The ECT, ratified both by the European Union (“EU”) and its Member States, is one of the most prolific treaties for investment arbitration, especially in Europe. It has sparked numerous claims connected in one way or another to the continent’s energy transition. The debate on whether the CJEU’s Achmea judgment, which had found the arbitration provision in an intra-EU bilateral investment treaty (“BIT”) to be incompatible with EU law, applies to arbitration under this multilateral treaty is therefore of great practical importance. Yes, says the European Commission. No, say arbitral tribunals – for example, in Vattenfall v Germany (ICSID Case No. ARB/12/12). A legislative solution has not yet been found: The EU Member States’ treaty to terminate intra-EU BITs leaves the signatories to “deal with [the ECT] at a later stage”. A modification of the ECT would require participation not just of the EU and its Member States, but of all fifty-three state parties to the multilateral treaty and is therefore a particularly challenging endeavour.
The question of intra-EU ECT claims is currently being brought to the CJEU’s attention on multiple paths: Belgium has submitted a request to the CJEU for an opinion on the matter in the context of the revamped ECT. Additionally, the Svea Court of Appeal (Sweden) has, on Italy’s request, recently sought the CJEU’s preliminary ruling on the issue in proceedings regarding Italy’s effort to set aside the award Athena Investments (formerly Greentech Energy Systems) and Novenergia v Italy (SCC Case No. 2015/095), after it had previously twice refused similar requests by Spain.
Komstroy v Moldova
By contrast, the proceedings in Komstroy v Moldova appear an unlikely contender to bring the intra-EU/ECT question to the CJEU’s bench, as the case does not involve an intra-EU claim. The dispute dates back to the late 1990s and arose out of the sale of electricity by Komstroy’s Ukrainian predecessor companies to a Moldovan state-owned entity. Hence, no involvement of any EU Member State. The Paris Court of Appeal, where the underlying award is being challenged, had consulted the CJEU regarding the interpretation of the term “investment” under the ECT. Yet, at a hearing before the CJEU in November 2020, France, Germany, Spain, Italy, the Netherlands, Poland as well as the European Commission argued that Achmea entailed the inapplicability of Article 26 ECT, whereas the Hungarian, Finnish and Swedish governments argued that Achmea’s reasoning could not be transferred to the ECT. Both Komstroy’s and Moldova’s lawyers took the view that the Achmea question was not relevant to their case.
The Advocate General’s Opinion
In his Opinion rendered on 3 March 2021 (only available in French and German at this stage), Advocate General Maciej Szpunar opines that “without a doubt” Achmea’s reasoning applies to intra-EU ECT claims.
He considers first that, as was the case in Achmea, Article 26 ECT allows disputes that may involve the interpretation of EU law to be submitted to an arbitral tribunal. Second, also as in Achmea, such an arbitral tribunal does not belong to the legal order of the EU and may therefore not make requests for preliminary reference under Article 267 of the Treaty on the Functioning of the European Union. The AG therefore considers Article 26 ECT to impact the autonomy of EU law in the same manner as the arbitration provision in the intra-EU BIT in Achmea. The EU itself being an ECT member does not change matters, says the AG: the EU’s ability to subject itself to the decisions of an international court under a treaty signed within its competences is, he says (in line with the CJEU’s case law), only permissible if the autonomy of the EU and its legal order are ensured.
Further, the AG distinguishes the intra-EU ECT question from the subject matter of the CJEU’s Opinion 1/17 regarding the EU-Canada Comprehensive Economic and Trade Agreement CETA. The question of a treaty (also) internally applicable among EU Member States was different to that of a treaty externally applicable between the EU and third states.
AG Szpunar also briefly touches on whether Article 16 ECT (Relations to Other Agreements) might be incompatible with EU law, but does not consider it necessary to resolve that question. A similar question of compatibility of substantive ECT provisions with EU law had previously been raised by AG Saugmandsgaard Øe in Foonote 55 of his Opinion in joined cases C‑798/18 and C‑799/18.
The CJEU is not bound by the opinion of AG Szpunar, but often follows its AGs’ opinions (whereas, notably, it did not do so in Achmea, where AG Wathelet had endorsed intra-EU BITs).It will be interesting to see whether the CJEU will address the ECT intra-EU issue in Komstroy v Moldova, a case where it does not seem to be ultimately relevant. If it does not, it will have ample opportunity to address the issue in the coming years, in cases such as Belgium’s request for opinion or the Svea Court of Appeal’s preliminary reference. In any case, if the CJEU is going to find intra-EU arbitration under the ECT incompatible with EU law, such judgment alone is unlikely to resolve the conundrum. After Achmea, arbitral tribunals have indeed steadfastly shown that they are not inclined to renounce jurisdiction because of the CJEU’s jurisprudence, and the CJEU will not necessarily be heard in future ECT cases if investors opt for ICSID arbitration or if the arbitration takes place at a seat outside the EU